UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  July 16, 2020

Griffin Capital Essential Asset REIT, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  000-55605
 
Maryland
  
46-4654479
(State or other jurisdiction of incorporation)
  
(IRS Employer Identification No.)
 
1520 E. Grand Avenue, El Segundo, CA 90245
(Address of principal executive offices, including zip code)
 
(310) 469-6100
(Registrant's telephone number, including area code)

None
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
____________________
_________________
____________________
None
None
None

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ¨  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




Item 8.01.    Other Events
June 30, 2020 Net Asset Value Per Share
As previously disclosed on April 2, 2020 in Griffin Capital Essential Asset REIT, Inc.'s (the "Registrant") Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC"), after March 31, 2020, the Registrant (i) ceased publishing a daily updated estimate of its net asset value ("NAV") per share; (ii) is continuing its internal procedures for calculating NAV per share; and (iii) will continue to publish updated estimates of its NAV per share on a quarterly basis. Accordingly, the Registrant is publishing its updated June 30, 2020 NAV per share.
The Registrant's board of directors (the "Board"), including a majority of its independent directors, has adopted valuation procedures, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of the Registrant's NAV. The Registrant's updated estimates of its NAV per share, which are published on a quarterly basis, are posted on the Registrant's website at www.gcear.com. Please see the Registrant's valuation procedures filed with the Registrant's most recent Annual Report on Form 10-K and the Registrant's subsequent Quarterly Reports and Current Reports, which were filed with the SEC and are available on the SEC's website at www.sec.gov, for a more detailed description of the Registrant's valuation procedures. The Registrant's NAV is calculated for the Registrant's Class T shares, Class S shares, Class D shares, Class I shares, Class A shares, Class AA shares, Class AAA shares and Class E shares by the Registrant's NAV Accountant, ALPS Fund Services, Inc., a third party firm approved by the Board, including a majority of its independent directors.
Set forth below are the components of the Registrant's daily NAV as of June 30, 2020 and March 31, 2020, calculated in accordance with the Registrant's valuation procedures (in thousands, except share and per share amounts):
 
June 30, 2020
 
March 31, 2020
Gross Real Estate Asset Value
$
4,295,142

 
$
4,431,973

Investments in Unconsolidated Entities
2,485

 
2,652

Management Comp. Value
230,000

 
230,000

Interest Rate Swap (Unrealized Loss)
(64,515
)
 
(56,651
)
Perpetual Convertible Preferred Stock
(125,000
)
 
(125,000
)
Other Assets (Liabilities), net
151,249

 
38,293

 Total Debt at Fair Value
(2,171,440
)
 
(2,086,121
)
NAV
$
2,317,921

 
$
2,435,146

 
 
 
 
Total Shares Outstanding
261,628,173

 
261,935,169

NAV per share
$
8.86

 
$
9.30

The Registrant's independent valuation firm utilized the discounted cash flow approach for 98 properties in the Registrant's portfolio with a weighted average of approximately 7.2 years remaining on their existing leases. Since the Pepsi Bottling Ventures property was acquired in February 2020, the Registrant did not obtain a valuation for such property and used purchase price in calculating the Registrant's NAV, in accordance with the Registrant's valuation procedures. In light of the impact that the COVID-19 pandemic has had on commercial real estate markets, the Registrant’s independent valuation firm made certain changes to cash flow assumptions for some of the Registrant’s properties, which were the primary reasons for the change in estimated NAV as of June 30, 2020 as compared to March 31, 2020. These changes include a reduction in certain market rent growth assumptions and an increase in downtime for certain vacant properties. The following summarizes the range of overall capitalization rates for the 98 properties using the cash flow discount rates:
 
Range
 
Weighted Average
Cash Flow Discount Rate (discounted cash flow approach)
6.00%
 
14.00%
 
7.56%
Terminal Capitalization Rate (discounted cash flow approach)
5.25%
 
9.75%
 
6.85%




The following table sets forth the changes to the components of NAV for the Registrant and the reconciliation of NAV changes for each class of shares (in thousands, except share and per share amounts):
 
Share Classes
 
 
 
 
 
Class T
 
Class S
 
Class D
 
Class I
 
Class E
 
IPO (1)
 
OP Units
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NAV as of March 31, 2020 before share/unit sale/redemption activity
$
5,208

 
$
17

 
$
382

 
$
17,743

 
$
1,444,892

 
$
669,414

 
$
297,490

 
$
2,435,146

Fund level changes to NAV
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain on net assets
(177
)
 
(1
)
 
(14
)
 
(603
)
 
(48,954
)
 
(22,659
)
 
(10,107
)
 
(82,515
)
Interest rate swap (unrealized loss)
(17
)
 
—

 
(1
)
 
(57
)
 
(4,664
)
 
(2,162
)
 
(963
)
 
(7,864
)
Dividend accrual
(35
)
 
—

 
(3
)
 
(164
)
 
(13,456
)
 
(6,280
)
 
(2,782
)
 
(22,720
)
Class specific changes to NAV
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholder servicing fees/distribution fees
(13
)
 
—

 
—

 
—

 
—

 
(1,042
)
 
(8
)
 
(1,063
)
NAV as of June 30, 2020 before share/unit sale/redemption activity
$
4,966

 
$
16

 
$
364

 
$
16,919

 
$
1,377,818

 
$
637,271

 
$
283,630

 
$
2,320,984

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unit sale/redemption activity- Dollars
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount sold
$
5

 
$
—

 
$
—

 
$
16

 
$
1,372

 
$
602

 
$
271

 
$
2,266

Amount redeemed and to be paid
—

 
—

 
—

 
—

 
(4,373
)
 
(951
)
 
(4
)
 
(5,328
)
NAV as of June 30, 2020
$
4,971

 
$
16

 
$
364

 
$
16,935

 
$
1,374,817

 
$
636,922

 
$
283,897

 
$
2,317,922

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NAV as of March 31, 2020
553,623

 
1,800

 
40,548

 
1,889,235

 
155,197,725

 
72,307,551

 
31,944,687

 
261,935,169

Shares/units sold
491

 
2

 
35

 
1,677

 
168,447

 
64,962

 
29,062

 
264,676

Shares/units redeemed
—

 
—

 
—

 
—

 
(468,671
)
 
(102,532
)
 
(467
)
 
(571,670
)
Shares/units outstanding as of June 30, 2020
554,114

 
1,802

 
40,583

 
1,890,912

 
154,897,501

 
72,269,981

 
31,973,282

 
261,628,175

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NAV per share as of March 31, 2020
$
9.41

 
$
9.40

 
$
9.39

 
$
9.39

 
$
9.31

 
$
9.26

 
 
 
 
Change in NAV per share/unit
(0.44
)
 
(0.43
)
 
(0.44
)
 
(0.43
)
 
(0.43
)
 
(0.45
)
 
 
 
 
NAV per share as of June 30, 2020
$
8.97

 
$
8.97

 
$
8.95

 
$
8.96

 
$
8.88

 
$
8.81

 
 
 
 
(1) IPO shares include Class A, Class AA, and Class AAA shares.






Amendment and Reinstatement of Distribution Reinvestment Plan and Partial Reinstatement of Share Redemption Program
As previously disclosed on February 27, 2020 in the Registrant's Current Report on Form 8-K filed with the SEC, in connection with a potential strategic transaction, on February 26, 2020, the Board approved the temporary suspension of (i) the Registrant's distribution reinvestment plan (as amended and restated, the "DRP"); and (ii) the Registrant's share redemption program (as amended and restated, the "SRP"). Redemptions sought upon a stockholder's death, qualifying disability, or determination of incompetence or incapacitation were honored in the first quarter of 2020 in accordance with the terms of the SRP.
Because the COVID-19 pandemic continues to have a material adverse impact on global commercial real estate activity, contributing to widespread market volatility and economic uncertainty, the Registrant's potential strategic transaction is more uncertain at this time. In light of these considerations, on July 16, 2020, the Board determined it would be in the best interests of the Registrant to (i) reinstate the DRP, effective July 27, 2020; (ii) amend the DRP to allow for the use of the most recently published NAV per share of the applicable share class available at the time of reinvestment as the DRP purchase price for each share class; and (iii) partially reinstate the SRP, effective August 17, 2020.
This Current Report on Form 8-K serves as the 30 days' notice of the partial reinstatement of the SRP per the terms of the program, and the 10 days' notice of the amendment and reinstatement of the DRP per the terms of the plan.
The SRP shall be reinstated as of August 17, 2020 for redemptions sought upon a stockholder's death, qualifying disability, or determination of incompetence or incapacitation in accordance with the terms of the SRP. Regular redemptions remain suspended at this time. The Registrant's quarterly cap on aggregate redemptions will be equal to the aggregate NAV, as of the last business day of the previous quarter, of the shares issued pursuant to the DRP during such quarter. Settlements of share redemptions will be made within the first three business days of the following quarter.
The DRP shall be reinstated as of July 27, 2020. Stockholders previously enrolled in the DRP will automatically be reinstated to the DRP unless they instruct the Registrant otherwise by placing a call to Investor Services for the Registrant at (888) 926-2688. Stockholders who were not previously enrolled in the DRP can obtain the proper forms for enrollment in the DRP at www.gcear.com.
The foregoing description of certain terms of the DRP does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the DRP, which is attached as Exhibit 4.1 to this Current Report on Form 8-K and incorporated herein by reference.
Disclaimer on Forward-Looking Statements
This current report on Form 8-K contains forward-looking statements. Forward-looking statements relate to future events and anticipated results of operations, business strategies, and other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as “anticipate,” “intend,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “plan,” “forecast,” “target” or similar words. Statements may be forward-looking even in the absence of these particular words. Where, in any forward-looking statement, the Registrant expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that such expectation or belief will result or be achieved. Statements contained herein that are not historical facts are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties detailed in the Registrant's filings with the SEC. These forward-looking statements speak only as of the date on which such statements are made, and the Registrant undertakes no obligation to update such statements to reflect events or circumstances arising after such date, except as required by law.






Item 9.01.    Financial Statements and Exhibits
(d)    Exhibits.
4.1    Amended and Restated Distribution Reinvestment Plan







Signature(s)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Griffin Capital Essential Asset REIT, Inc.
 
 
 
Date: July 17, 2020
By:
/s/ Howard S. Hirsch
 
 
Howard S. Hirsch
 
 
Chief Legal Officer and Secretary



EXHIBIT 4.1

GRIFFIN CAPITAL ESSENTIAL ASSET REIT, INC.
DISTRIBUTION REINVESTMENT PLAN
Amended and Restated as of July 27, 2020
Griffin Capital Essential Asset REIT, Inc., a Maryland corporation (the “Company”), has adopted a distribution reinvestment plan (the “DRP”), the terms and conditions of which are set forth below.
1.Distribution Reinvestment. As agent for the stockholders of the Company (“Stockholders”) who (A) purchased shares of the Company’s common stock (the “Shares”) pursuant to the Company’s initial public offering (“Initial Public Offering”), (B) purchase Shares pursuant to any subsequent offering of the Company (“Offering”), or (C) are stockholders holding Class E shares of the Company’s common stock, and who elect to participate in the DRP (the “Participants”), the Company will apply all distributions declared and paid in respect of the Shares held by each participating Stockholder (the “Distributions”), including Distributions paid with respect to any full or fractional Shares acquired under the DRP, to the purchase of the Shares for such participating Stockholders directly, if permitted under state securities laws and, if not, through the dealer manager or participating dealers registered in the participating Stockholder’s state of residence (“Participating Dealers”).
2.Effective Date. The DRP became effective on July 31, 2014. The board of directors of the Company amended and restated the DRP on November 11, 2014, June 16, 2015, March 29, 2016, November 15, 2016, September 8, 2017, and April 15, 2019 (with varying effective dates). The board of directors of the Company further amends and restates the DRP on July 16, 2020, effective July 27, 2020. Any amendment or amendment and restatement to the DRP shall be effective as provided in Section 12.
3.Eligibility and Procedure for Participation. Any Stockholder who purchased Shares pursuant to the Initial Public Offering, purchases shares in any subsequent Offering, or is a stockholder holding Class E shares of the Company’s common stock and who has received a prospectus, as contained in a registration statement filed by the Company with the Securities and Exchange Commission (the “SEC”), may elect to become a Participant by completing and executing the Subscription Agreement, an enrollment form or any other appropriate authorization form as may be available from the Company, the dealer manager or Participating Dealer. The Company may elect to deny a Stockholder participation in the DRP if the Stockholder resides in a jurisdiction or foreign country where, in the Company’s judgment, the burden or expense of compliance with applicable securities laws makes the Stockholder’s participation impracticable or inadvisable. Participation in the DRP will begin with the next Distribution payable after receipt of a Participant’s accepted subscription, enrollment or authorization.
Once enrolled, a Participant may continue to purchase stock under the DRP until all of the shares of stock registered have been sold, the Company no longer has an ongoing offering, or the Company has terminated the DRP. A Participant can choose to have all or a portion of distributions reinvested through the DRP. A Participant may also change the percentage of distributions that will be reinvested at any time by completing a new enrollment form or other form provided for that purpose. Any election to increase a Participant’s level of participation must be made through a Participating Dealer or, if purchased other than




through a Participating Dealer, through the Company’s dealer manager. Shares will be purchased under the DRP on the date that Distributions are paid by the Company.
Each Participant agrees that if, at any time prior to the listing of the Shares on a national securities exchange, he or she fails to meet the suitability requirements for making an investment in the Company or cannot make the other representations or warranties set forth in the Subscription Agreement, he or she will promptly so notify the Company in writing.
4.Purchase of Shares. Distributions on Shares will be reinvested into additional Shares of the same class. Participants may acquire DRP Shares at a price equal to the net asset value (“NAV”) per Share applicable to the class of Shares purchased by the Participant, calculated using the most recently published NAV available at the time of reinvestment, until the earliest of (i) the date that all of the DRP Shares registered have been issued or (ii) all offerings terminate and the Company elects to deregister with the SEC the unsold DRP Shares. The use of the Company's NAV as the DRP Share price was determined by the Company’s board of directors in its business judgment. The Company’s board of directors may set or change the DRP Share price for the purchase of DRP Shares at any time in its sole and absolute discretion based upon such factors as it deems appropriate. Participants in the DRP may also purchase fractional Shares so that 100% of the Distributions will be used to acquire Shares; however, a Participant will not be able to acquire DRP Shares to the extent that any such purchase would cause such Participant to exceed the ownership limit as set forth in the Company’s charter or otherwise would cause a violation of the share ownership restrictions set forth in the Company’s charter.
Shares to be distributed by the Company in connection with the DRP may (but are not required to) be supplied from: (a) Shares registered, or to be registered, with the SEC in the Initial Public Offering or a subsequent Offering for use in the DRP (a “Registration”), or (b) Shares of the Company’s common stock purchased by the Company for the DRP in a secondary market (if available) or on a national securities exchange (collectively, the “Secondary Market”).
Shares purchased in any Secondary Market will be purchased at the then-prevailing market price, which price will be used for purposes of issuing Shares in the DRP. Shares acquired by the Company in any Secondary Market or registered in a Registration for use in the DRP may be at prices lower or higher than the Share price which will be paid for the DRP Shares pursuant to the Initial Public Offering or a subsequent Offering.
If the Company acquires Shares in any Secondary Market for use in the DRP, the Company shall use its reasonable efforts to acquire Shares at the lowest price then reasonably available. However, the Company does not in any respect guarantee or warrant that the Shares so acquired and purchased by the Participant in the DRP will be at the lowest possible price. Further, irrespective of the Company’s ability to acquire Shares in any Secondary Market or to make an offering for Shares to be used in the DRP, the Company is in no way obligated to do either, in its sole discretion.
5.No Commissions. No selling commissions, dealer manager fees, or stockholder servicing fees will be paid with respect to the DRP Shares, but the DRP Shares will be charged the applicable distribution fee payable with respect to all Shares of the applicable class.




6.Exclusion of Certain Distributions. The board of directors of the Company reserves the right to designate that certain cash or other distributions attributable to net sale proceeds will be excluded from Distributions that may be reinvested in shares under the DRP.
7.Taxation of Distributions. The reinvestment of Distributions in the DRP does not relieve Participants of any taxes which may be payable as a result of those Distributions and their reinvestment pursuant to the terms of this Plan.
8.Stock Certificates. The ownership of the Shares purchased through the DRP will be in book-entry form unless and until the Company issues certificates for its outstanding common stock.
9.Voting. A Participant may vote all shares acquired through the DRP.
10.Reports. Within 90 days after the end of the Company’s fiscal year, the Company shall provide each Stockholder with an individualized report on his or her investment, including the purchase date(s), purchase price and number of Shares owned, as well as the dates of Distribution payments and amounts of Distributions paid during the prior fiscal year.
11.Termination by Participant. A Participant may terminate participation in the DRP at any time, without penalty by delivering to the Company a written notice. Prior to listing of the Shares on a national securities exchange, any transfer of Shares by a Participant to a non-Participant will terminate participation in the DRP with respect to the transferred Shares. Upon termination of DRP participation for any reason, Distributions paid subsequent to termination will be distributed to the Stockholder in cash.
12.Amendment or Termination of DRP by the Company. The board of directors of the Company may by majority vote (including a majority of the Independent Directors) amend, modify, suspend or terminate the DRP for any reason upon ten days’ written notice to the Participants, which notice may be provided by filing a Current Report on Form 8-K with the SEC, and if the Company is still engaged in an offering, notice may be provided in a supplement to the prospectus or Post-Effective Amendment filed with the SEC; provided, however, no such amendment shall add compensation to the DRP or remove the opportunity for a Participant to terminate participation in the plan, as specified above.
13.Liability of the Company. The Company shall not be liable for any act done in good faith, or for any good faith omission to act, including, without limitation, any claims or liability (a) arising out of failure to terminate a Participant’s account upon such Participant’s death prior to receipt of notice in writing of such death, or (b) with respect to the time and the prices at which Shares are purchased or sold for a Participant’s account. Any limitation of the Company’s liability under this Section 13 may be further limited by Section II.G. of the Statement of Policy Regarding Real Estate Investment Trusts published by the North American Securities Administrators Association, as applicable. To the extent that indemnification may apply to liabilities arising under the Securities Act of 1933, as amended, or the securities laws of a particular state, the Company has been advised that, in the opinion of the SEC and certain state securities commissioners, such indemnification is contrary to public policy and, therefore, unenforceable.